Landlord's Guide to Rental Income Tax (MRI) in Kenya

If you receive rental income in Kenya, you are legally required to pay Monthly Residential Rental Income (MRI) Tax. This is one of the most under-filed taxes in Kenya — largely because many landlords still do not know the obligation exists. KRA does know, and enforcement has increased significantly through 2025 and 2026.

This guide gives you everything you need: who pays MRI, how much, when, how to file, what eTIMS means for landlords, and how to manage it all efficiently.

What is MRI Tax? How It Changed in 2024

MRI (Monthly Residential Income tax) replaced the previous rental income tax regime effective 1 January 2024 under the Finance Act 2023. The old system required landlords to declare rental income annually in their income tax returns and could claim deductions for expenses. The new MRI system is simpler but harsher in one key way: no deductions are allowed.

The MRI rate — 7.5% on gross rental income — was chosen as a flat, easy-to-calculate rate. But because there are no deductions, a heavily mortgaged landlord may find MRI means paying tax even when making a net loss on the property.

Who Pays MRI Tax?

Any person or entity receiving residential rental income from property in Kenya, where annual rental income falls within the specified thresholds:

• Below KES 288,000/year (KES 24,000/month) — exempt from MRI. You owe no MRI tax, though you may still need to file a NIL return if you are registered for the obligation.
• KES 288,001 – KES 15,000,000/year — MRI applies at 7.5% of gross rent received. This is the vast majority of Kenya's residential landlords — anyone renting a bedsitter in Nairobi's Eastlands to a luxury apartment in Kilimani falls in this range.
• Above KES 15,000,000/year — MRI does not apply. You are taxed under normal income tax bands (10%–35% progressive rates after personal relief) and you can claim expense deductions including mortgage interest, management fees, and maintenance costs.

The MRI Tax Rate and What "No Deductions" Actually Means

The rate is 7.5% of your total gross rental income. This is applied to every shilling of rent you collect — before you pay your mortgage, before maintenance costs, before your agent's commission, and before any other expense.

This matters enormously in practice. Consider a landlord who bought a unit using a mortgage:

• Monthly rent received: KES 80,000
• Monthly mortgage payment: KES 65,000
• Other costs (maintenance, management fee): KES 8,000
• Net cash flow: KES 7,000/month
• MRI tax due: 7.5% × KES 80,000 = KES 6,000/month
• After-tax income: KES 1,000/month

The landlord made KES 7,000 in real cash but pays KES 6,000 of it in MRI tax. Under the old system, the mortgage interest would have been deductible, reducing the tax significantly. Under MRI, it is not. This is the trade-off for the simplicity of the regime.

MRI Tax Calculation Examples

Use the formula: MRI Tax = 7.5% × Monthly Gross Rent × 12 months = Annual MRI Tax

• Single bedsitter at KES 15,000/month (KES 180,000/year) — below threshold, exempt. KES 0 MRI tax.
• 1-bedroom flat at KES 30,000/month (KES 360,000/year) — above threshold. Annual MRI = 7.5% × 360,000 = KES 27,000/year (KES 2,250/month).
• 3-bedroom house at KES 80,000/month (KES 960,000/year) — Annual MRI = 7.5% × 960,000 = KES 72,000/year (KES 6,000/month).
• Portfolio of 5 units averaging KES 50,000/month each (KES 3,000,000/year total) — Annual MRI = 7.5% × 3,000,000 = KES 225,000/year (KES 18,750/month).

When and How to Pay MRI Tax

MRI tax is paid monthly — due by the 20th of each month — for that month's rental income. This is different from how some landlords think: you do not wait until year end to settle your rental tax. You pay as you collect.

The filing process on iTax:

1. Log in to itax.kra.go.ke
2. Click Returns → File Returns → Monthly Residential Income (MRI)
3. Select the month and enter your total gross rent received
4. The system calculates 7.5% automatically
5. Generate a payment slip and pay via M-Pesa or bank transfer
6. Download your payment acknowledgement

The filing takes about 5 minutes once you have your monthly rent totals. The challenge is remembering to do it every single month before the 20th — and having accurate rent figures ready.

What Happens If You Miss the 20th

The late filing penalty for MRI is KES 5,000 or 5% of the MRI tax due — whichever is higher. Additionally, interest accrues at 2% per month on any unpaid MRI amount.

If you have not filed MRI for the past 12 months and your monthly rental income is KES 60,000, you have:

• Unpaid MRI: 7.5% × 60,000 × 12 = KES 54,000
• Late filing penalties (12 months × KES 5,000): KES 60,000
• Interest on unpaid tax (12 months at 2%): approximately KES 12,000
• Total exposure: approximately KES 126,000 on a tax that would have been KES 54,000 if paid on time

Commercial Rent — A Completely Different Regime

MRI applies only to residential property — flats, houses, bedsitters, and similar units rented to individuals for residential use. Commercial property (offices, shops, warehouses, factory space) is taxed differently:

• Commercial landlords with annual turnover above KES 5 million must register for VAT and charge tenants 16% VAT on commercial rent
• They must issue eTIMS VAT invoices to every commercial tenant
• Commercial rental income is declared on the landlord's annual income tax return, not MRI
• Commercial landlords can deduct property costs (mortgage interest, maintenance, management fees, depreciation) from their income before calculating income tax

If you own a property that has both residential and commercial units, you must track the income separately and apply the correct tax regime to each portion.

eTIMS for Residential Landlords

Residential rent is VAT-exempt — you do not charge tenants VAT on residential rent. This means you are not issuing VAT invoices in the traditional sense. However, from 2026, KRA expects all declared income to be backed by electronic records in the eTIMS system.

What this means in practice:

• You should issue eTIMS income receipts (not VAT invoices) for each rent payment you receive
• These receipts record the rental income in KRA's database and support your MRI declarations
• If KRA queries your declared rental income, having eTIMS receipts makes the verification process straightforward
• Without eTIMS records, any undeclared rental income found during an audit becomes fully taxable — often with retrospective penalties

How to Register for MRI Obligation on iTax

If you are not yet registered for MRI on iTax, here is how to set up the obligation:

1. Log in to itax.kra.go.ke
2. Navigate to Registration → Add Obligation
3. Select "Monthly Residential Rental Income (MRI)"
4. Enter your rental details (property address, number of units, approximate monthly income)
5. Submit — you will receive confirmation and your first MRI return will be due by the 20th of the following month

Note: Registering for MRI does not mean KRA now knows your rental income in detail — you declare that in each monthly return. But registration formally puts you in the system and prevents you from being flagged as a non-filer.

Common Mistakes Kenyan Landlords Make

• Filing annually instead of monthly — MRI is a monthly obligation, not annual. Some landlords try to catch up at year end, which means 11 months of late filing penalties.
• Misclassifying commercial tenants as residential — A business renting your property for an office is a commercial tenant, subject to VAT rules, not MRI.
• Not registering for MRI until after KRA contacts them — By that point, the backlog of unfiled returns has already accrued significant penalties.
• Thinking the MRI threshold is per-unit — The KES 288,000 threshold applies to your total rental income from all properties combined, not per unit. If you have five units each earning KES 10,000/month, your combined income is KES 600,000/year — well above the threshold.
• Not separating M-Pesa rental payments from business income — If rent comes in through the same M-Pesa account as your business income, it can be difficult to separate during an audit. Use a dedicated M-Pesa line or account for rental collections.

Managing MRI Compliance with KompliTax

KompliTax Landlord Mode is designed specifically for Kenyan landlords managing multiple units:

• Track each property and tenant separately
• Match M-Pesa rent payments to specific tenants automatically
• Generate eTIMS rental receipts for each payment
• Calculate your monthly MRI liability automatically
• Receive reminders 7 days and 2 days before the 20th deadline
• Download a monthly MRI summary ready to use when filing on iTax

At KES 99/unit/month with a minimum of 5 units, KompliTax Landlord is priced to be a fraction of the cost of a single late filing penalty — and removes the administrative burden that causes most landlords to miss their deadlines in the first place.